All bills which are not expressed to be payable to bearer require the endorsement of the payee before presentation or negotiation. An endorsement may be in blank, that is, where no endorsee is specified, or it may be a special endorsement, in which case the further endorsement of the endorsee is necessary. It is to be noted that since the passing of the Bills of Exchange Act, a bill which is endorsed in blank may be made payable to the order of another person either by the holder writing above the endorser's name a direction to pay the bill to the order of himself or of some other person, or by a similar direction signed by the holder. For example, a bill is payable to John Robinson and endorsed in blank. Below Robinson's endorsement is written "Pay to the order of W. Howard,
James Owens." The bill now requires the endorsement of W. Howard.
When a banker in the ordinary course of business pays a cheque drawn upon him, he is not liable for any loss arising from the forgery of the payee's or endorsee's signature, provided the signature purports to be that of the payee or endorsee; but this protection does not extend to the banker paying a bill of exchange accepted payable at his bank, and any loss so incurred must in the ordinary course be borne by the paying banker. When, however, the payee is a fictitious or non-existing person, the bill may be treated as payable to bearer. In the well-known case of Vagliano Bros. v. Bank of England, it was decided that a person who had no interest in the transactions out of which the bill arose, though an actually existing person, is yet a fictitious person within the meaning of Section 7 of the Bills of Exchange Act. Vagliano innocently accepted bills upon which the drawer's and payee's names had been forged by his clerk, and the Bank of England paid the bills in the ordinary course. The payee's name so forged was that of one of Vagliano's regular customers, but as he had no share in any transaction giving rise to the bills, the House of Lords decided that he was in this case a "non-existing or fictitious person." Some bankers have been accustomed to treat cheques drawn upon them payable to "Cash," "Wages," or other impersonal payee, as coming within this section of the Bills of Exchange Act, but it seems very open to doubt whether such payees can be considered "fictitious or non-existent persons." An endorsement must be written on the bill, and in practice it is written on the back of the bill, though an endorsement on the face would probably be legal. When there is no room on the back it is usual to endorse on a slip of paper attached to the bill and called an "allonge," and such an endorsement is legally deemed to be written on the bill. An endorser by endorsing a bill engages that on due presentment it shall be accepted and paid according to its tenour, and that if dishonoured he will compensate the holder or a subsequent endorser who is compelled to pay it, provided that the requisite proceedings on dishonour be duly taken. When a banker discounts a bill he is therefore careful to see that it bears not only the endorsement of the payee and any endorsees, but also of the customer for whom he discounts it, should the latter not be the payee or an endorsee, otherwise he will have no recourse against his customer in the event of the dishonour of the bill.
The law is silent as to the form of a valid endorsement, and the determining factor where there is any doubt is the custom of merchants and bankers. Those who wish to study the subject are recommended to read "Questions on Banking Practice," published under the authority of the Council of the Institute of Bankers. This book possesses especial value because in the absence of any expressed law on the subject, it is an authoritative exposition of what bankers consider to be the usual custom.
Where a bill is payable after sight, presentment for acceptance is necessary in order to fix the maturity of the bill, and the date of the acceptance should in all cases be added. When the bill expressly states that it must be presented for acceptance, or when it is drawn payable elsewhere than at the residence of the drawee, it must be presented for acceptance before it can be presented for payment. In no other case is presentment for acceptance necessary in order to render liable any party to the bill, but in practice it is usual to present all bills for acceptance except those drawn payable on demand, at sight or on presentation, in order to obtain an admission of liability from the drawee. The usual form of acceptance is to write across the face of the bill, "accepted payable at ------," naming the bank, or other place, where it is to be paid, adding the signature of the accepter; but the mere signature of the accepter is sufficient without any addition. If the place of payment is not indicated, the bill must be presented for payment at the address of the drawee as given on the bill, or if not given, at his last known place of business.
Bills payable on demand, at sight, or on presentation, must be presented within a reasonable time, regard being had to the nature of the bill, the usage of trade with regard to similar bills, and the facts of the particular case. All other bills must be presented for payment on the day of maturity. Failure to comply with this will entail the release of the drawer and the endorsers from all liability on the bill. It is therefore essential that bankers shall keep an accurate record of the due dates of all bills of which they are the holders. This is done not only by keeping all bills sorted according to their due dates, but, as an additional check, by entering the due dates in a Bill Diary kept for the purpose.
If a bill has been dishonoured by non-acceptance, another person sometimes intervenes and accepts the bill for the honour of the drawer. In such cases the bill must have been previously protested or noted for non-acceptance, and, if payable after sight, the maturity is calculated from the date of such noting. At maturity the bill must be presented to the drawee before presentation to the accepter for honour, and if unpaid must be protested or noted for non-payment.